Tax-free component

You don't have to withhold any tax on the tax-free component of a member benefit.

Taxable component – super lump sum

The taxable component of a lump sum is assessable income. However, the tax rates on super lump sum payments are subject to a maximum tax rate or a cap. These caps (low rate cap amount and untaxed plan cap amount) are given effect through tax offsets that reduce the individual’s marginal tax rate to the specified maximum tax.

Low rate cap amount

The low rate cap amount is the limit set on the amount of taxable components (taxed and untaxed elements) of a super lump sum that can receive a lower (or nil) rate of tax. It applies to members that have reached their preservation age but are below 60 years. It is a lifetime cap. Once the member has reached the low rate cap, any further benefits should be taxed at a higher rate.

The low rate cap amount for the 2015–16 year is $195,000. This amount is indexed each year in line with average weekly ordinary time earnings.

Taxable component – super income stream

The taxable component of a super income stream is assessable income for the recipient and is subject to withholding tax. Some super income streams are eligible for a tax offset. You will need to work out the tax offset amount and inform the recipient of this amount.

The Medicare levy of 2% will apply to all super payments (lump sums and income streams) where the rate of tax is greater than 0%.

Temporary budget repair levy

The temporary budget repair levy is payable at a rate of 2% for taxable incomes over $180,000. It applies from 1 July 2014 to 30 June 2017, for both resident and non-resident individuals.

The levy will impact some super benefit payments; however, tax offsets continue to have effect to ensure that the relevant maximum rate of tax is applied. This means that you are generally not required to withhold the 2% levy when paying a super benefit unless the benefit is:

a lump sum that contains an untaxed element in excess of the untaxed plan cap amount

an income stream payment above $180,000.

The taxation of a super benefit paid from a complying super fund is based on the amount of the benefit, the age of the recipient and other factors.

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.